JPMorgan Global Growth & Income 18 February 2022
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JPMorgan Global Growth & Income (JGGI) offers investors a ‘core’ style of global equity investing. Its managers, Helge Skibeli, Rajesh Tanna and Timothy Woodhouse are freed of the confines of conventional equity-income investing, as the trust pays out 4% of its financial year-end NAV as a Dividend by tapping into both its revenue and capital. This means that the managers have the ability to navigate the market as they see appropriate, maximising total return rather than being hamstrung by the need to generate income.
The advantages of the team’s flexibility have been made apparent over recent months, whereby they have moved JGGI away from its previous ‘growth’ bias to a more ‘core’ style. This reflects the team’s current concerns around valuations, which they believe have become overly stretched in certain sectors. They have instead positioned JGGI into more modestly valued re-opening winners and have selected financial and semi-conductor stocks, as we describe in the Portfolio section.
The advantages of JGGI’s dividend structure are also demonstrated by its long-term Performance, whereby JGGI has easily outperformed global equity markets over the last five years, despite its high yield. JGGI also compares favourably to its peers, being the best performing trust over the last one and three years, with the managers having shown clear value-add to global equities. JGGI continues to trade on a premium, currently 3.6% and has largely done so since adopting its new mandate in 2016 (see Discount).
The most substantial change to JGGI over the last year is the forthcoming merger with Scottish Investment Trust (SCIN), with the JGGI team retaining their investment mandate. This will bring advantages to JGGI’s shareholders, thanks to the removal of JGGI’s performance fee and increased liquidity.
We believe JGGI offers investors a potential ‘one-stop-shop’ solution for equity income investors. Thanks to the flexibility JGGI’s dividend profile offers, income investors need not worry about having to compromise on capital growth to achieve an attractive level of yield. This has not always been the case for more conventional equity-income strategies, as high-yielding stocks have long been associated with underperforming sectors. Given that JGGI’s return and income profile is only possible in the investment trust structure, investors may seldom find other similar strategies. Thanks to JGGI’s ability to pay dividends from capital, it can also offer a source of diversification to pre-existing income portfolios, as investors may find little commonality between JGGI’s holdings and those of other income strategies.
We are encouraged by the team’s active positioning over recent months, as they shifted the portfolio away from the more highly valued sectors before the recent market correction. We think the team’s willingness to adapt to different market environments makes it stand out against its peers. However, the main disadvantage of JGGI is that its dividend cannot be guaranteed to be progressive and may decline if its financial year-end falls on a down-market.
We view the merger between JGGI and SCIN as a huge benefit to JGGI’s existing shareholders, thanks to the increased liquidity and improved fee profile of the trust, with the merger of the two trusts under JGGI’s strategy acting as a vote of confidence for the approach.
|Has been able to successfully navigate recent market turmoil
|Dividend cannot be guaranteed to be progressive
|Offers equity income investors a good source of diversification
|Slightly high volatility compared to peers and benchmark
|Merger with SCIN will bring greater liquidity and the removal of JGGI’s performance fee
|Currently trades at a premium to NAV